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SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recent Accounting Pronouncements
In January 2014, the FASB issued ASU 2014-01, Investments—Equity Method and Joint Ventures (Topic
323): Accounting for Investments in Qualified Affordable Housing Projects, to provide additional flexibility
with regard to accounting for investments in qualified affordable housing projects. ASU 2014-01 modifies
the conditions that must be met to present the pretax impact and related tax benefits of such investments as
a component of income taxes (“net” within income tax expense), to enable more investors to elect to use a
“net” presentation for those investments. Investors that do not qualify for “net” presentation under the new
guidance will continue to account for such investments under the equity method or cost method, which
results in losses recognized in pretax income and tax benefits recognized in income taxes (“gross”
presentation of investment results). For investments that qualify for the “net” presentation of investment
performance, ASU 2014-01 introduces a “proportional amortization method” that can be elected to amortize
the investment basis. If elected, the method is required for all eligible investments in qualified affordable
housing projects. ASU 2014-01 also requires enhanced recurring disclosures for all investments in qualified
affordable housing projects, regardless of the accounting method used for those investments. It is effective
for interim and annual periods beginning after December 15, 2014, and early adoption is permitted. The
Company adopted ASU 2014-01 in the first quarter of 2015, however we are continuing to account for our
low-income housing tax credit investments using the equity method therefore there was no impact on our
income statement or balance sheet, but our disclosures with regard to low-income housing tax credit
investments were updated to reflect the new requirements.
In January 2014, the FASB issued ASU 2014-04, Receivables—Troubled Debt Restructurings by Creditors
(Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans
upon Foreclosure, to resolve diversity in practice with respect to a creditor’s reclassification of a
collateralized consumer mortgage loan to other real estate owned (OREO). Current US GAAP requires a
loan to be reclassified to OREO upon a troubled debt restructuring that is “in substance a repossession or
foreclosure”, where the creditor receives “physical possession” of the debtor's assets regardless of whether
formal foreclosure proceedings take place. The terms “in substance a repossession or foreclosure” and
“physical possession” are not defined in US GAAP; therefore, questions have arisen about when a creditor
should reclassify a collateralized mortgage loan to OREO. ASU 2014-04 requires a creditor to reclassify a
collateralized consumer mortgage loan to real estate property upon obtaining legal title to the real estate
collateral, or when the borrower voluntarily conveys all interest in the real estate property to the lender to
satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. ASU 2014-04 is effective
for public business entities for interim and annual periods beginning after December 15, 2014. ASU 2014-
04 did not have any impact on the Company’s financial statements or operations upon adoption.
In April 2015 the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs, to simplify the presentation of debt issuance costs
related to a recognized debt liability by reflecting those costs as a direct deduction from the carrying amount
of debt liability, consistent with debt discounts. ASU 2015-15 was subsequently issued in August 2015 to
clarify the SEC staff’s position on presenting and measuring debt issuance costs incurred in connection with
line-of-credit arrangements. ASU 2015-03, as modified by ASU 2015-15, is effective for interim and annual
periods beginning after December 15, 2015. Early adoption is permitted if the guidance is applied as of the
beginning of the annual period of adoption. We do not expect the adoption of this guidance to have a
material effect on our consolidated financial statements.